Alexander's ($ALX) restructured a $300M loan on its retail condo, buying back a portion for 44 cents on the dollar. The lender took a 56% haircut but retained a subordinated "hope piece." This shrewd move saved ALX $17.2M in annual interest expense and preserved strategic control of the asset.
The primary short thesis for ALX hinged on upcoming debt maturities and an imminent dividend cut. However, the company successfully restructured its near-term debt. Furthermore, CEO Steve Roth has signaled he will not cut the dividend, supported by cash reserves and a planned asset sale that would provide further liquidity.
Blackstone, a savvy real estate investor, has acquired two grocery-anchored shopping center REITs in the last two years. This pattern suggests strong institutional appetite for the asset class. Whitestone REIT ($WSR), one of the last remaining small-cap players in this space, is a logical takeout candidate as a result.
Unlike other sectors, share buybacks are rare for REITs because management prioritizes maintaining low leverage to please debt rating agencies. When a conservative REIT does initiate a buyback, it's a strong signal that management believes the stock is significantly undervalued, as they are willing to risk a negative watch from those agencies.
A sum-of-the-parts analysis suggests Alexander's ($ALX) is worth ~$340/share versus its ~$240 price. The valuation is anchored by its Bloomberg Tower asset and cash balance. This implies investors are essentially getting the company's Queens apartment building, shopping center, and a prime development site for free.
Alexander's primary asset, the Bloomberg Tower, has a lease until 2040 with significant built-in rent bumps. The rent will step up from ~$79M to $88M in 2028. By 2030, a reset guarantees a minimum rent of $85.7M but could go as high as $104M depending on market rates, providing a powerful, contractual growth driver.
Alexander's ($ALX) moved tenants from its Rego 1 property to the adjacent Rego 2. This move strengthened Rego 2 by increasing occupancy, but more importantly, it eliminated 330,000 sq ft of competing local retail space. This strategic consolidation enhanced the value of the entire location and freed up Rego 1 for a lucrative sale as a development site.
Concerns about Vornado controlling Alexander's ($ALX) are mitigated by CEO Steve Roth's incentives. Key executives own ~46% of ALX versus ~10% of Vornado. Roth's personal dividend income from his ALX stake ($12M/year) dwarfs his compensation from the company, suggesting he is highly motivated to maximize ALX's value.